2019 (2) TMI 230 - AT - Income Tax

Tribunal rules non-resident agent not subject to tax for overseas commission

The Asst. Commissioner of Income Tax Versus M/s. Cotton Code Garments

The Tribunal upheld the deletion of the addition made by the Assessing Officer for non-deduction of tax at source on overseas commission. It was ... TDS u/s 195 - non-deduction of TDS with respect to expenditure incurred on overseas commission - M/s. Anvil Corporation, USA a non-resident enterprise acts as an intermediary between the assessee’s company and M/s. Billbang facilitating the business activity of the assessee and the assessee Company is liable to pay commission for it - Held that:- M/s. Anvil Corporation, USA has rendered service to the assessee Company abroad and therefore the facts are identical to the decision rendered by the Hon’ble Jurisdictional Madras High Court in the case CIT vs. Faizan Shoes [2014 (8) TMI 170 - MADRAS HIGH COURT] held that the services rendered by the non-resident agent can at best be called as a service for completion of the export commitment and would not fall within the definition of “fees for technical services”, we are the firm view that Section 9 of the Act is not applicable to the case on hand and consequently, Section 195 of the Act does not come into play. - Decided in favour of assessee. Issues:Appeal against deletion of addition made for non-deduction of tax at source on overseas commission.Analysis:The Revenue appealed against the deletion of an addition of &8377; 1,14,43,418 made by the Assessing Officer under Section 40(a)(ia) of the Act for non-deduction of tax at source on overseas commission. The assessee, engaged in garment manufacturing and exporting, filed its return for the assessment year 2013-14, admitting total income of &8377; 26,87,750. The case was selected for scrutiny, and the AO made additions, including the aforementioned one. The Commissioner of Income Tax (Appeals) deleted the addition, citing a decision of the Jurisdictional Madras High Court. The Tribunal noted that the facts involved M/s. Anvil Corporation, USA acting as an intermediary for the assessee, rendering services abroad, for which the assessee was liable to pay commission. The Tribunal referred to legal precedents, including the Toshoku Limited case, to establish that the non-resident agent's services outside India did not fall under the definition of 'fees for technical services.'The Tribunal held that Section 9 of the Act was not applicable to the case, and consequently, Section 195 of the Act did not come into play. It was emphasized that the services provided by the non-resident agent were for completing export commitments and did not qualify as 'fees for technical services.' The Tribunal found no fault in the Commissioner of Income Tax (Appeals) decision and dismissed the Revenue's appeal. The Tribunal concluded that since the Commissioner of Income Tax (Appeals) based the decision on the Jurisdictional Madras High Court's ruling, which aligned with the facts of the case, there was no need to interfere with the decision.In summary, the Tribunal upheld the deletion of the addition made by the AO for non-deduction of tax at source on overseas commission, based on the findings that the services provided by the non-resident agent did not fall under the purview of Section 9 of the Act. The decision was in line with legal precedents and the principle that tax deduction was not required for services rendered outside India.